You must have encountered images with different file extensions like .jpg, .jpeg, .bmp, .png, .gif etc. JPG and JPEG images are most commonly encountered because most digital cameras and scanners use this file format for images. For a person who hasn’t been much into graphic design, these file formats may not be very important or he/she may not be aware of differences between working with these file formats. One difference you may have noticed is image size. JPG and JPEG images take least disk space. Image sizes indicate quality of images and images who cover larger disk space should be of higher quality (not always because there might be redundant data because of poor image processing).
Adobe Photoshop uses its own file format called PSD. You can also call it native file format of Adobe Photoshop. PSD files keep detailed data and intelligence information of images. PSD files take largest disk space but allow easily manipulation of high quality images. But, PSD files are not meant to be distributed to general public as it can’t be read without access to Adobe Photoshop program. Only Adobe Photoshop users and graphic designer or professionals would be able to use PSD file formats. When distributing images to other people, it must be converted into one of the proper formats like JPG, JPEG, GIF, PNG, BMP etc. But, you must always keep a copy of project saved into PSD format even if the project is completed as you may have to work on it again if such a necessity arises.
Some more information about other graphic file formats. JPEG image formats are most popular. Remember jpeg is a lossy format. It discards some information which doesn’t effect viewing experience thus decreasing image size but rendering it useless for computer based image processing.
BMP are image file formats used by lots of Microsoft Windows programs. They are uncompressed and so have large file sizes.
GIF and PNG are based on lossless compression which means these files don’t lose quality because of compression and reduced file sizes. These files are mostly used for graphics on web pages. GIF uses just 256 colors but can produce cartoon like animation by storing a series of images in a small size file.
TIFF is an older file format not used much any more as we have much better file formats now.